Govt mulling fiscal incentives for domestic shipping, shipbuilding

Mamuni Das
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Pradeep K. Sinha, Shipping Secretary
Pradeep K. Sinha, Shipping Secretary i

‘Aimed at reducing manufacturing costs’

At a time when shipping and shipbuilding sector are going through a low phase world-over, a move to provide some fiscal incentives for Indian shipbuilders and Indian shipowners might gather some pace.

This follows a Committee of Secretaries meeting on the issue last week.

The Shipping Ministry discussed a proposal to provide fiscal incentives to the shipping and shipbuilding sector in the meeting. Shipping Secretary Pradeep K. Sinha spoke to Business Line on this issue. Edited excerpts:

Shipping and shipbuilding sector in India have not found Government support for the past few years. The shipbuilding subsidy scheme was not extended beyond 2007. Is the Ministry making any move on this?

The Committee of Secretaries met last week to discuss various options on shipbuilding and ship-owning. The meeting was attended by representatives from the Ministries such as Defence, Defence Production, Revenue and Commerce.

This sector has not grown. Only about eight per cent cargo is carried in Indian flagged vessels. If we consider Indian built, Indian flagged vessels, then the percentage share will be much lesser.

Various fiscal measures aimed at reducing the manufacturing cost of shipbuilding were considered. One measure was making available cheap financing for ship acquisition as is available in Korea and China.

These two countries account for 76 per cent of ships built in world market. As for the subsidy scheme, we discontinued it in 2007 unlike China. If revived for a few years, it can reduce manufacturing cost and help shipyards grow.

We have sought infrastructure status for shipping and shipbuilding.

What is the status of proposal on providing cargo commitment for Indian shipowners - even CAG had flagged the issue?

We are also in talks with the Ministries for provision of long term cargo commitment by public sector units in sectors such as oil, steel, coal and even Food Corporation of India.

Last year, security clearances, like environment clearances, had started affecting the pace of bidding. What is the scene this year?

Earlier, we were facing delays. But, now due to continuous monitoring, the process has been streamlined. Port project bidding should pick up pace this year.

This year, in the first half, we focused on the intermediate steps of bidding such as obtaining security clearance, environment clearance and public private partnership appraisal committee (PPPAC) clearances.

This year, have an ambitious target of awarding 42 projects with 251 million tonnes a year (mtpa) capacity, and investment requirement of Rs 14,770 crore. Till now, nine projects with a capacity creation of 33.25 mtpa and an investment of Rs 2,162 crore have been achieved. Four projects were awarded in October. In the remaining part of November, we have a target of awarding three projects. They include shallow-draft berth in Tuticorin, mega container terminal in Chennai and mechanised coal import terminal in Goa.

Recently, there have been some instances of companies exiting after bidding for projects. Do you intend to put higher penalties in the concession agreement for such cases?

Not really. The decision will be taken on a case-by-case basis according to the guidelines of the concession agreement.

What is the status of an earlier proposal to do away with tariff setting mechanism?

On a long term basis, we would like to do away with tariff fixation for ports and let the competition dictate the tariffs. For that, the major ports Act will have to be amended.

We are currently further simplifying the tariff setting guidelines – whenever that is finalised, it will apply prospectively for projects that are awarded after they are finalised.

(This article was published on November 20, 2012)
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